Biden’s victory a boon for semiconductors
The Trump administration’s relentless attempts to suffocate China’s semiconductor advancement has not just disrupted China’s supply chain, but has also stifled US semiconductor companies as a result.
Kenanga Research
KUALALUMPUR: With Joe Biden as the new US president, the team at Kenanga Investment Bank Bhd (Kenanga Research) believe his approach to policy setting will likely be more sensible as compared with the previous administration.
“The Trump administration’s relentless attempts to suffocate China’s semiconductor advancement has not just disrupted China’s supply chain, but has also stifled US semiconductor companies as a result,” it said in a thematic report yesterday.
“This is mainly due to the fact that China plays a crucial role on the demand side of things, consuming more than half of global semiconductor shipment.”
Narrowing it down to the Huawei as a single entity, the research firm could see that its top five US-based supplier have revenue exposure of circa eight to 11 per cent while NeoPhotonics has an exceptionally high exposure of 47 per cent.
The adverse impact to US firms would be further amplified if such irrational bans were to extend to the semiconductor manufacturing firms in China such as SMIC, which is China’s largest wafer foundry and ranked third globally in terms of capacity.
“Therefore, with Biden taking over the new US administration, we expect to see easing of such unreasonable bans and erratic policy-making which would restore the semiconductor industry to its glory days,” it hoped.
This comes as China is seen to be firing on all cylinders as the Chinese government set up the “Big Fund Phase-2” with an investment sum of 204 billion yuan or US$29.8 billion to achieve technology self-sufficiency.
Closer to home, Kenanga Research said Malaysia has been a net beneficiary of this trade friction.
Dubbed as the technology hub in Malaysia, Penang is home to more than 300 multi-national corporations and more than 3,000 SMEs.
The strategic location of Penang coupled with its wellplanned infrastructure continue to attract foreign direct investments from the likes of US, Germany, Japan and Singapore.
“As of 2019, the approved manufacturing investments in Penang almost tripled, hitting a record high of RM16.9 billion,” it saw.
“This accounts for 20 per cent of Malaysia’s 2019 manufacturing investment.
“Almost 90 per cent of the RM16.9 billion was contributed by foreign direct investments (FDI) amounting to RM15 billion, placing Penang as the highest FDI state in Malaysia for 2019.
“According to the Malaysia Investment Development Authority (MIDA), these FDI involves 166 projects that are expected to create 18,886 new jobs in Penang.The momentum continues as the first half of 2020 recorded new investment of RM9.1 billion, representing 54 per cent of 2019’s figure.
“This year also saw MNCs such as Intel, Lam Research, Bosch, and B Braun announcing billion-ringgit plans to set up new plant in Penang as a result of trade diversion owing to the long standing US-China tension.”
The need for fab expansion due to the surge in demand can also be observed in the local scene as SilTerra Malaysia Sdn Bhd (SilTerra), a loss-making wafer foundry, has attracted bids from foreign parties for potential takeover.
Kenanga Research highlighted that there is an ongoing bidding war among Germany’s X-FAB, Taiwan’s Foxconn, Beijing CGP Investment Co Ltd (via a 40:60 consortium with DNex Bhd) and Green Packet Bhd.
“There is no verdict yet but Foxconn was reportedly the highest bidder with US$150 million cash offer,” it revealed.